Mortgage is defined as someone uses real estate and other physical assets or negotiable securities, contracts, etc. as collateral, then obtains bank loans and pays off the principal and interest in instalments according to the contract, and the bank returns the collateral after the loan is repaid.

Mortgage in a broad sense mainly refers to any form of real estate mortgage provided to the debtor or a third party without transferring possession.

The mortgage in the narrow sense mainly refers to the mortgage loan for the purchase of the house provided to the buyer. The purpose of the loan is to buy a house (mainly a residence). Not all mortgages with houses as the collateral can be called mortgages.

What are mortgage methods?

There are two kinds of methods: equal principal and equal principal and interest.

Equal principal and interest repayment, that is, the borrower repays the same amount to the bank every month, and the monthly loan interest is calculated based on the remaining loan principal at the beginning of the month and is settled monthly. Day by day, the proportion of principal in the repayment will be higher and higher, while the proportion of interest will be lower and lower, and the overall interest will be much higher than the equivalent principal.

Equal principal repayment, also known as repayment of interest with principal, equal principal, and unequal interest repayment. The lender amortizes the principal within each month and pays off the interest between the last-transaction date and the current repayment date. Compared with the equal principal and interest, this repayment method has lower total interest expenses, but more principal and interest shall be paid in the early stage, and then the repayment burden decreases month by month.

What is the difference between a mortgage loan and a collateral loan?

First, the purpose of the loan is different. Mortgage loan is to mortgage the house that has not been purchased while applying for a loan at the same time, and then make monthly repayments to regain the ownership of the house. While the collateral loan is to use the already purchased house as collateral to borrow money from the bank for car buying, tourism, or other commercial purposes.

Second, in terms of the mortgage loan, before the borrower has obtained the title certificate, he can apply for a loan first, but for a collateral loan, he must first provide the house ownership certificate, land use right certificate, etc., and then use the certificate to apply for other property rights certificates which are finally used as a mortgage to apply for a loan.

Third, the time limit for mortgage loan repayment is 30 years for first-hand houses and 20 years for second-hand houses. Collateral loans generally have a maximum term of repayment of no more than 10 years.

Fourth, they have different loan interest rates. Mortgage loans have lower interest rates than collateral loans.

（Writer：Xifei）